Sale of a home owned by a trust

[lynlit50]

What is the name of your state (only U.S. law)? Oregon. My mother recently passed away. Her home (which she lived in) was in a trust. We are now selling the home with the proceeds to go to her three children. Will the 250,000 capital gains exemption apply to the trust?

 

[HappyWanderer]

Who sold the property? The trust or the person?

Have you dealt with the step up in basis?

 

[LdiJ]

What is the name of your state (only U.S. law)? Oregon. My mother recently passed away. Her home (which she lived in) was in a trust. We are now selling the home with the proceeds to go to her three children. Will the 250,000 capital gains exemption apply to the trust?

It really doesn't matter.

Because your mother passed away, the property received a stepped up basis, to fair market value, as of the date of your mother's death.

Therefore there should be no capital gain, and therefore no capital gains tax to pay. In fact, taking selling costs into consideration, its likely that there would be a small capital loss.

 

[HappyWanderer]

For a living trust it wouldn't matter (which is why I mentioned the step-up), but what if the trust was a QPRT or other irrevocable trust? Mom could still be living there and the transfer could have happened long ago.

 

[LdiJ]

For a living trust it wouldn't matter (which is why I mentioned the step-up), but what if the trust was a QPRT or other irrevocable trust? Mom could still be living there and the transfer could have happened long ago.

Well, if it was a grantor trust it wouldn't matter, but yes, there are some kinds of trusts where the basis could have been established in the past. However, most likely it was a living trust.

If it was a kind of trust where the transfer happened a long time ago, then there would be no current step up in basis, and no capital gains exclusion, therefore the parties would be paying long term capital gains tax on any gains.

The should probably consult a tax professional with the trust in hand.